Trade, investment, and a skilled workforce are critical ingredients in Kenya’s bid to become a rapidly industrializing middle-income nation by 2030. [17] In each of these respects, the U.S. government is an indispensable partner in creating an enabling environment for Kenya to modernize its economy. In this section, we examine how favorable U.S. trade, immigration, and investment policies are helping Kenya transform its economy in line with Vision 2030.
Since the 1980s, Kenya has made strides to liberalize its economy through a series of reforms to its trade and economic policies (Zepeda et. al., 2009). More recently, President Uhuru Kenyatta identified boosting the country’s manufacturing and exports as one of four key priorities in Kenya’s Vision 2030 plan. The United States is an important trading partner as the destination market for 8.7 percent of Kenya’s exports in 2017 alone, the vast majority of which are from the textiles industry (WITS, n.d.).
Over the last two decades, Kenya increased its export revenues from the United States by 285 percent (see Figure 6). From 2014 to 2018, Kenya’s yearly export revenues from the United States were approximately USD 576 million on average. Notably, Kenya’s textiles industry largely drove this growth, comprising more than 60 percent of all commodity exports to the United States in recent years (see Box 5). The U.S. government’s passage of favorable trade legislation, such as the 2000 African Growth and Opportunity Act (AGOA), arguably helped open the path for the United States to become the largest overseas market for Kenyan textiles.
AGOA offers trade preferences to eligible African countries, including Kenya, that allow almost all marketable goods to enter the U.S. market duty-free, including textiles, which saw dramatic growth after AGOA came into effect.
The legislation also creates positive incentives for the Kenyan government to make progress in areas aligned with the emphasis on inclusive growth and good governance in Vision 2030—establishing a market-based economy, strengthening the rule of law, combating corruption, and protecting workers’ rights—that are also required in order to maintain AGOA eligibility (U.S. Trade Representative).
Notes: This graph shows the total value of commodities imported by the U.S. from Kenya (line) between 2000 and 2018, and textiles as a percentage of the total value of commodities imported by the U.S. from Kenya ( bars). All figures are in constant 2019 USD.
Source: World Integrated Trade Solution (WITS), The World Bank.
The African Growth and Opportunity Act was passed into law by the U.S. Congress on May 18, 2000. This legislation significantly enhances access to the U.S. market for qualifying sub-Saharan African countries that meet a set of conditions contained in the legislation. These conditions require countries to work on improving their rule of law, human rights, and labor standards. The Act was initially passed for a period of eight years but has been since renewed until 2025. A special dispensation clause relating to textiles and apparel was also added to the AGOA Act, which required the United States to import textiles from AGOA-eligible countries before sourcing from other countries. This preferred textile sourcing condition has likely contributed to the increasing Kenyan exports to the United States.
Investing in Kenya’s workforce to gain new skills is essential to the country’s efforts to modernize its economy toward a smaller and more productive agriculture sector and increased industrialization. In support of this objective, the U.S. government facilitates opportunities for Kenyan students and scholars to advance their training and education at U.S. institutions of higher learning through its visa programs designed for students (F-1 visas) and scholars (J-1 visas). Figure 7 visualizes the overall volume of new Kenyan students and scholars coming to the United States each year from 2010 to 2018.
Notes: This graph visualizes the volume of new Kenyan students and scholars granted visas to come to the United States between 2010 and 2018.
Source: U.S. Department of State.
Besides offering Kenyans the opportunity to acquire marketable skills necessary for high-paying jobs, U.S. institutions also foster the next generation of Kenya’s leaders, global thinkers, and innovators. Graduating from Amherst College in Massachusetts in 1985 with a degree in economics and political science, President Uhuru Kenyatta is perhaps the most notable Kenyan today who received a higher education in the United States.
Many Kenyan students and scholars receive financial support over the course of their study through scholarships provided by U.S. universities or U.S. government programs, such as the Fulbright Scholarship or the International Visitors Leadership Program (IVLP). We estimate that Kenyan students and scholars in the United States receive at least USD 19.6 million in support each year. This estimate is based on the average of 400 Kenyan students that were actively pursuing a PhD program at U.S. institutions in any given year between 2014 and 2019. [18]
Kenyan students pursuing doctorate degrees in the United States are generally fully funded by their host institutions, including tuition fees, health insurance, and monthly stipends. [19] This is likely an underestimate of total U.S. educational assistance to Kenyan students and scholars, as some Kenyans pursuing other levels of education (e.g., bachelors, masters, certificate programs) may also receive financial assistance from their host institution.
While most students and scholars return to Kenya following completion of their educational programs, some choose to join the U.S. workforce in specialty occupations through the H-1B visa program. This program allows highly skilled workers from foreign countries to become a part of the U.S. workforce and acquire other valuable skills and experience. From 2014 to 2018, the U.S. government granted 130 H-1B visas for Kenyans annually. With the average visa tenure of 6 years and an approximate annual salary of USD 80,600 for H-1B visa recipients, we make a conservative estimate that Kenyan citizens earned about USD 62.86 million while employed in the United States. [20]
Between 2009 and 2018, the United States granted Legal Permanent Resident (LPR) status, popularly known as the Green Card, to 70,136 Kenyans. The holders of this legal status are eligible for a wide range of highly sought-after employment opportunities not available to other immigrants. According to the U.S. Department of Homeland Security’s statistics, Kenya is among the top five African countries in terms of Green Card holders. Most Kenyan LPRs as well as H-1B workers maintain strong ties with Kenya and continue to support their families, friends, and communities through investments in Kenyan businesses and real estate, as well as remittances.
Kenya’s Vision 2030 acknowledges the importance of attracting Foreign Direct Investment (FDI) to support the country’s critical infrastructure needs. U.S. government-backed insurance guarantees play an important role in increasing the confidence of prospective foreign investors through reducing political and economic barriers to invest in Kenya’s economy.
The U.S. International Development Finance Corporation (DFC), formerly known as the Overseas Private Investment Corporation (OPIC), is an independent government agency that assists American corporations looking to do business and invest in developing countries. [21] Between 2010 and 2018, the U.S. government through OPIC provided bilateral financing and risk insurance for 16 projects in Kenya, totaling USD 664 million (approximately USD 74 million annually). The majority of these funds spurred investment in infrastructure projects to build Kenya’s capacity in renewable energy (see Figure 8), including the Kipeto Wind Power Project and the OrPower 4 Geothermal Power Station expansion (see Box 6). Other projects supported economic growth through improving access to banking, school and housing construction, and agricultural value chains.
Source: DFC (formerly OPIC) and MIGA, the World Bank.
Similarly, the United States has also supported the operations of the World Bank’s Multilateral Investment Guarantee Agency (MIGA) to provide guarantees for corporations looking to invest in Kenya from other advanced and emerging economies. Through its core support to the World Bank’s International Development Association, the United States has underwritten roughly 12 percent of MIGA guarantees since 2010, for an estimated USD 77 Million of the total USD 840.3 million guaranteed for investment projects over that period (roughly USD 8.6 million per year). These also primarily funded renewable and non-renewable energy projects, but some supported banking, financial services, and agricultural enterprises.
Through its OPIC and MIGA guarantees, the US government has created an enabling environment for Kenya to attract USD 742 million in private sector investments since 2010.
The Kipeto Wind Power Project and the expansion of the Olkaria III Geothermal Power Station are two of the highest-value projects supported by U.S. investment guarantees in Kenya, and both showcase engagement with a breadth of U.S. actors and U.S. channels of funding. Together, these two projects play a key role in supporting Kenya’s Vision 2030 goals of increasing electricity access and the development of new and renewable sources of energy (Vision 2030).
The Kipeto Wind Farm, located 70 kilometers southwest of Nairobi, has been the intended site of a large-scale wind farm since the Belgian government installed a turbine there in 1993 (Power Africa, 2019). Large-scale development of the Farm has only been realized more recently, however, thanks to a partnership between General Electric and Kipeto Energy Limited. This partnership between American and Kenyan companies was able to secure an OPIC commitment for USD 232.56 million dollars in 2015 (USD 251.16 million in constant 2019 dollars), roughly 72 percent of the total estimated costs for the project (DFC, 2020). With an additional USD 50 million in risk insurance underwritten by OPIC in 2018 (USD 51 million in constant 2019 dollars), the wind farm installed the first of 60 GE turbines in December 2019 (Kipeto Energy, 2019). While construction is ongoing, the Kipeto Wind Farm will eventually produce 100 megawatts of power, enough to provide energy for 40,000 homes in the region (General Electric, 2018).
The expansion of the Olkaria III geothermal power station, located 90 kilometers northwest of Nairobi, similarly demonstrates the multiple channels of U.S. support to Kenya’s energy sector. In 2011, OPIC provided a guarantee of USD 215.1 million to Ormat Technologies (USD 245.3 million in constant 2019 dollars) to support the expansion, in parallel with the World Bank’s MIGA guarantee of USD 134 million (USD 152.8 million in constant 2019 dollars). With support from these two additional investment guarantees, the Olkaria III power station increased its generation capacity from 48 megawatts to 84 megawatts, nearly doubling its productive output (World Bank, 2020).
In this chapter, we examined three ways in which the U.S. government contributes to Kenya’s growth and prosperity. However, the United States-Kenya partnership is about more than government intervention alone. In fact, U.S.-based private philanthropies, companies, non-governmental organizations, and individuals have developed close ties with their Kenyan counterparts over the last two decades. In the next chapter, we explore how these relationships benefit Kenya’s economy and its people.